Millions of Americans may potentially benefit from a disaster relief tax exemption following a declaration of a national emergency by President Donald Trump.

On March 13, President Trump issued an emergency declaration in response to the ongoing coronavirus disease (COVID-19) pandemic. This declaration will allow certain disaster relief payments received by individuals to qualify for exemption from federal income tax. Congress enacted this exemption in 2002 in response to relief efforts following the September 11 attacks on the U.S.

Relief payments entitled to this tax exemption include any amount paid to or for the benefit of an individual to reimburse or pay personal, family, living, or funeral expenses incurred as a result of the disaster. Such relief could, for instance, be paid by an individual’s employer. The tax code also generally exempts from tax any payments from a government agency in connection with a disaster relief program. Such payments are not subject to employment tax withholding.

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